Product Market Competition, Operating Inefficiency And Enterprise Value

With the rapid development of global science and technology, the level of product market competition which China’s industry enterprises faced has been strengthened. Product market competition has become an important external governance mechanism, making the impact on enterprise management. Operating inefficiency will damage the enterprise value to some extent. So, is the product market competition play a role of evolution of governance? That when the level of product market competition is different, does it lead that enterprise operating inefficiency influence on the enterprise value will be different? This research is of great significance that the enterprise shareholders and management according to the level of product market competition make decisions to improve enterprise value.This paper is based on Competition Theory, Efficiency Theory and Asymmetry Information Theory as the theoretical basis, taking the product market competition, operating inefficiency and enterprise value into the same research framework, to reveal the product market competition for operating inefficiency affects the role of enterprise value. Taking 6509 a-share listed company data from 2010 to 2014 as the research object, this article investigate the operating inefficiency of two kinds of measuring methods and enterprise value from the perspective of the product market competition, which reviews the operating inefficiency under different level of product market competition influence on the enterprise value.In this paper, the study found that:firstly, by two kinds of measuring methods of operating inefficiency can significantly reduce the enterprise value, namely, the enterprise operation inefficiency does damage to the enterprise value, but has nothing to do with the choice of measuring methods. Secondly, compared net income to net cash flow of operating activities on measuring operating inefficiency, net cash flow of operating activities can be more negative impact on the enterprise value, namely, the net cash flow of operating activities reflects the efficiency of the enterprise operating activities more than net income. Thirdly, with different level of product market competition of Chinese listed companies, operating inefficiency influence the enterprise value amplified. In the industry with the high level of product market competition, such as manufacturing, operating inefficiency will be more significant damage to the enterprise value. Innovation points of this article are:this paper measures operating inefficiency to avoid the problem of poor operating efficiency comparable, and adopts two kinds of measuring methods to avoid the one-sidedness of the measuring methods; It reveals that product market competition as an important external governance mechanism will enlarge operating inefficiency the negative impact of enterprise value, which is advantageous to the related policy.